Prediction: CDs Will Earn Less Than This Investment Over the Next 5 Years

Certificates of deposit (CDs) have been rockin' it lately, but that doesn't mean they're the best way to grow your money. While CDs provide an amazing level of security by virtue of being FDIC insured, there's an investment that I'm confident will allow me to earn far more money over the next five years: The S&P 500.

Whether you're a long-time investor or an investing beginner, stay with me here as I tell you why I'm sticking with the stock market.

Historical performance

As someone who spent years teaching and writing about history, I'm all about looking to the past to identify patterns. When it comes to the S&P 500 -- a stock market index that tracks the stock performance of 500 of the largest companies on the stock exchanges -- it's all about digging into past performance.

As the last week or so has shown us, the market falls and rises, often based on whatever's going on in the news. You don't have to be Nostradamus to predict that the market will experience dramatic losses and then make even more dramatic gains. It has been thus since we first began tracking the S&P 500. For example:

While past performance is no guarantee of the future, 150 years of evidence feels pretty solid to me, backing up my own experience with the market. Whether I'm investing through a mutual fund, 401(k), or buying individual stocks, my goal has never been to invest in winners every time. It's been to invest in more winners than losers. That's how I've slowly built my portfolio.

Don't get me wrong

I'm as impressed by current CD rates as anybody and think they're a great place to park money I'm not going to need for a while but plan on using at some point. I just don't believe the rates are going to remain high as the post-pandemic economy normalizes.

What I do know is this: Once S&P 500 returns have been adjusted for inflation, the lowest 50-year period averaged an annual return of 6.965%. I've yet to see a CD with a rate of nearly 7%.

One personal issue I've been working on (for decades) is not borrowing trouble. I used to keep myself awake at night, worried about world events. At some point, my mind would circle around to what would happen to my investments if everything went south.

Just to give you an idea of what the S&P has had to endure, take a look at a handful of world events that have taken place over the past 150 years.

• Asiatic Flu (1889-1890)
• World War 1 (1914-1918)
• Spanish Flu (1918-1920)
• The Great Depression (1929-1939)
• World War II (1939-1945)
• Korean War (1950-1953)
• Cuban Missile Crisis (1962)
• Vietnam (American involvement from 1965-1975)
• The Gulf War (1990-1991)
• The Cold War (1947-1991)
• The Great Recession (2007-2009)

In short, world events have gone south -- many times. Still, despite sometimes steep drops in stock values, the market has rebounded with gusto.

No one can tell you the S&P 500 will not disappoint you. I can't, and neither can a stock broker. What we can say is that it's been a pretty reliable investment vehicle for generations of investors. My prediction is that the same will remain true for at least the next five years.